Bumitama Agri - Maybank Kim Eng 2016-01-22: Sell-down overdone; BUY

Bumitama Agri (BAL SP) - Sell-down overdone; BUY

Strong 4Q15 FFB output should restore confidence

BAL’s production trend has normalised as FFB nucleus output peaked in 4Q15 with sharp growth of 29% YoY (+30% QoQ).

We expect no surprises in BAL’s FY15 earnings. This should help restore some investor confidence as we believe the recent sell-down is overdone amidst anxiety over its 4Q15 output as BAL’s estates are largely in the drought-affected areas in Kalimantan.

Maintain BUY and TP of SGD0.85 based on 13x 2016 PER.

FFB output peaked in 4Q15

BAL announced a strong set of 4Q15 production figures. Production finally caught up in 4Q15 with FFB nucleus output of 499,212 MT (+29% YoY, +30% QoQ), which represents 32% of its 2015 output. This brings 2015 FFB nucleus output to 1,578,815 MT (+13% YoY), which met 98% of our full-year forecast.

The quarterly production trend appears to have normalised with a distinct peak in the final quarter as 2014’s trend was an anomaly. In any case, this set of production figures will allay investors’ fears of a disappointing 4Q15.

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